One week until $2400 ‘lazy tax’ kicks in
AUSTRALIANS with private health insurance will be in for a rude shock come April 1 when premiums go up on average 3.25 per cent.
Add in cuts to the federal government's rebates, which will bump up the cost of a single-person top hospital policy from around $2540 to $2625, and you can expect to pay an average of $207 more per year for exactly the same product.
But this is nothing compared to the "lazy tax" most private health insurance customers are slugged with every year, which can run up to $2400.
AUSTRALIA AND THE LAZY TAX
New data from comparison site Finder shows Australians are lazy when it comes to shopping around for private health, or changing to a better deal, and it's costing us.
Twenty-seven per cent of Aussies have stuck with the same health fund, while a further 34 per cent have only switched once in their lifetime.
This means private health insurance holders in Australia are getting stung by the "lazy tax" that comes with not switching, according to Finder's personal finance expert Kate Browne.
"Premiums are rising every year, and some insurers are hiking up their rates more than others," Ms Browne said.
"Loyalty really doesn't pay off. While shopping around and researching the ins and outs of cover can be complicated, the savings every month could really add up over a year."
This view was seconded by Canstar's Steve Mickenbecker.
"The difference in premium for a gold style product - between the high and the low is $200 a month - that's $2400 a year," Ms Mickenbecker said.
"It's absolutely worth shopping and there's plenty of choices, you're mad if you don't."
Andrew Frances, 39, from Erskineville in Sydney switched private health providers late last year.
"I decided to change last year on the recommendation of colleagues and I was sick of extra costs going up every year," Mr Frances said.
"I switched to teachers health, I got a much better deal through them."
He'd been with NIB since he was 29 but found the switching process painless.
"I think it was pretty easy to switch. It requires some thought and a bit of time and energy looking at alternatives but it just a little bit of extra time," he says.
WHY LOYALTY DOESN'T PAY
Melbourne University marketing expert Dr Brent Coker told news.com.au that businesses benefited from customers not changing providers.
"Every business wants customer loyalty because it's cheaper to retain existing customers than to acquire new customers," Dr Coker said.
"But Customers are reluctant to switch for a whole variety of reasons not just cost."
He said the unknown was a key reason why people stay with what they know.
"Unless they suffer a transgression or use the service along the line and it doesn't go well for them there's no motivator for them to switch," he said.
"If everyone shifts around regularly that should, in theory, bring prices down but people are locked in and lazy and that's what keeps prices up to a certain extent."
Amanda Cunningham, 27, from Melbourne, told news.com.au she was considering dropping her private health cover but had never changed her private health provider before.
"I went straight to my own private health NIB as soon as I came off my parents' cover," she says.
"I think this is the first time I've considered dropping it because in previous years I used my private health a lot."
THE COST OF NOT SWITCHING
Finder insurance specialist Sophie Walsh told news.com.au many people don't update policies when things change, which could cost them extra in the long run.
"Parents could still be paying for pregnancy cover even if they don't need it," she says.
"They have kids but they don't add kids to their policy, or they have a single policy when they might be better off switching to a couple fund."
She also says it's important for people to review their policies this year, as reforms brought in by the Federal government could see people moved into lower levels of coverage while still paying more.
"It's set and forget, you only think about it when you need to use it," she says. "It's crazy to think you're happy to spend hundreds or more on a policy that may not be fit for purpose."
David Ross is a freelance finance writer. Continue the conversation @FakeDavidRoss